…Janet Yellen’s testimony to Congress this week… acknowledging that a recent decline in inflation further below the central bank’s 2% target may not, in fact, be as fleeting as policymakers had hoped…. The latest figures are clearly heading in the wrong direction. Consumer prices held flat in June despite expectations for a 0.1% increase and the annual rate, which the Fed watches closely, registered just 1.6%. The Fed’s preferred measure of inflation, the personal consumption expenditures index, has also been slipping…. Not one but two regional Fed banks have just downgraded their growth estimates….

The Fed has frequently been overly optimistic about its predictions for rate hikes in the post-recession era. This rather stunning chart from Deutsche Bank’s Torsten Slok is rather instructive: